etf

We think the long-term outlook for China — and Chinese stocks — is bright. That’s because the country’s huge population is generally younger than North Americans, and large numbers of Chinese have the potential to advance from poverty into the middle class. (One of the best ways for investors to tap into Chinese growth is through low-fee exchange-traded funds. The SPDR S&P China ETF is one example of an exchange traded fund that focuses on China. You can get our very latest buy/sell/hold advice on this fund in the latest issue of Canadian Wealth Advisor. See below for further details.)

Political instability still a danger to foreign investors in China

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SPDR S&P CHINA ETF $75.92 (New York Exchange symbol GXC; buy or sell through brokers; www.spdrs.com), is an exchange-traded fund that aims to track the S&P China BMI Index. This index is made up of all of the publicly traded Chinese stocks that are available to foreign investors. Right now, SPDR S&P China ETF holds 147 stocks. The $669.0-million fund’s top holdings are: China Construction Bank, 7.6%; China Mobile, 6.5%; Industrial & Commercial Bank of China, 5.3%; CNOOC Ltd., 4.8%; Baidu Inc., 4.6%; Bank of China, 4.4%; China Life Insurance, 3.9%; Petro-China, 3.9%; Tencent Holdings Ltd., 3.0%; and China Petroleum & Chemical, 2.5%. The fund’s breakdown by industry is as follows: Financials, 32.5%; Oil and Gas, 16.0%; Information Technology, 13.1%; Telecommunication Services, 9.0%; Consumer Discretionary, 6.2%; Basic Materials, 5.8%; Consumer Staples, 4.6%; Utilities, 1.9%; and Health Care, 1.0%....

GUGGENHEIM CHINA SMALL CAP ETF $28.35 (New York Exchange symbol HAO; buy or sell through brokers; www.guggenheimfunds.com) aims to track the AlphaShares China Small Cap Index. This index is made up of all investable Chinese stocks with market caps between $200 million and $1.5 billion. The $374.8-million fund’s top holdings are Zhaojin Mining Industry, 1.5%; China Everbright, 1.3%; China Shipping Container Lines, 1.3%; BBMG Corp., 1.3%; Semiconductor Manufacturing International, 1.2%; Zhuzhou CSR Times Electric Co., 1.2%; Great Wall Motor Corp., 1.2%; Shanda Interactive Entertainment, 1.2%: China BlueChemical, 1.2%; and China Shanshui Cement Group, 1.1%. As China’s economy matures, and consumers feel more protected by the expanding social-safety net, domestic spending should rise. The ongoing Arab revolution could also spur China’s leaders to boost spending on social programs and services to ease the growing gap between the rich and poor. This fund is well positioned to benefit from these trends....

Chinese stocks are down roughly 12% since November 2010. That’s largely because investors fear that interest-rate increases designed to slow inflation will hurt the country’s economic growth. However, the long-term outlook for China, and Chinese stocks, is bright. And one of the best ways for investors to tap into that growth is through low-fee exchange-traded funds (ETFs). Here are two Chinese ETF recommendations. One invests in all of the publicly traded Chinese stocks available to foreign investors. The other holds small-cap Chinese stocks....

Exchange-traded funds (ETFs) may have a place in your portfolio. That’s because, unlike many other financial innovations, they don’t load you up with heavy management fees, or tie you down with high redemption charges if you decide to get out of them. Instead, they give you a low-cost, flexible, convenient alternative to mutual funds. ETFs trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You’ll have to pay brokerage commissions to buy and sell ETFs. However, ETFs’ low management fees still give them a cost advantage over most conventional mutual funds. As well, shares are only added or removed when the underlying index changes. As a result of this low turnover, you won’t incur the regular capital-gains bills generated by the yearly distributions most conventional mutual funds pay out to unitholders....

The Indian government recently projected that the country’s economy will grow at a rate of 8.6% this year. That’s up from the 8.0% growth rate the country recorded last year. That would be the country’s fastest growth rate since 2008. The government expects the fastest growth to come in India’s service sector (11%), followed by manufacturing (8.8%) and agriculture (5.4%).

Exchange traded funds make foreign investing simple

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GLOBAL X SILVER MINERS ETF $25.72 (New York symbol SIL; buy or sell through brokers; www.globalxfunds.com) tracks the Solactive Global Silver Miners Index. This index includes between 20 and 40 international companies that mine, refine or explore for silver. Germany-based Structured Solutions AG developed this index. Global X Silver Miners ETF came out in April 2010 in response to a hot theme — in this case, strong investor interest in precious-metals stocks. But although it’s new, Global X Silver Miners ETF holds only well-established silver miners....

ISHARES FTSE/XINHUA CHINA 25 INDEX FUND $44.32 (New York Exchange symbol FXI; buy or sell through brokers) is an ETF that aims to track the FTSE/Xinhua China 25 Index, which is made up of the 25 largest and most liquid Chinese stocks. All of the stocks in the index trade on the Hong Kong exchange. Some also trade as American Depositary Receipts (ADRs) on the New York exchange. The fund’s top holdings are China Mobile, 9.7%; China Construction Bank, 9.6%; CNOOC, 8.3%; Industrial & Commercial Bank, 8.0%; China Life, 5.7%; Petrochina, 4.3%; Ping An Insurance, 4.2%; Bank of China, 4.2%; China Petroleum & Chemical, 4.2%; and China Unicom Hong Kong, 4.1%. The fund’s holdings give it the following industry breakdown: Financials, 47.3%; Telecommunications, 17.7%; Oil and Gas, 16.7%; Basic Materials, 10.3%; Industrials, 6.1%; and Consumer Services, 1.8%. The ETF has an expense ratio of 0.72%....

ISHARES MSCI BRAZIL INDEX FUND $77.55 (New York Exchange symbol EWZ; buy or sell through brokers), is an exchange-traded fund that is designed to track the Brazilian stock market. The fund’s top holdings are Petrobras preferred shares (energy), 10.3%; Cia Vale do Rio Doce (mining) preferred, 9.8%; Itau Unibanco Multiplo SA (banking), 9.2%; Petrobras common, 8.2%; Cia Vale do Rio Doce common, 7.2%; Banco Bradesco preferred (banking), 5.1%; Cia de Bebidas das Americas preferred (beer and other beverages), 3.5%; Itausa-Investimentos Itau (conglomerate), 3.1%; OGX Petroleo e Gas Patricipa (energy), 2.6%; and BM&F Bovespa (Brazilian stock exchange), 2.6%. The ETF’s industry breakdown is as follows: Materials, 25.4%; Financials, 25.0%; Energy, 21.9%; Consumer Staples, 9.1%; Utilities, 5.3%; Consumer Discretionary, 4.8%; Industrials, 3.4%; Telecommunication Services, 2.6%; and Information Technology, 1.7%. The fund has an expense ratio of 0.61%....

ISHARES S&P INDIA NIFTY 50 INDEX FUND $30.91 (Nasdaq symbol INDY; buy or sell through brokers; us.ishares.com), is an ETF that aims to track the S&P CNX Nifty Index, which represents the 50 largest, most liquid Indian securities. The fund’s top holdings are Reliance Industries (conglomerate), 9.8%; Infosys Technologies (software), 9.1%; ICICI Bank, 7.2%; Larsen & Toubro Ltd. (conglomerate), 5.8%; Housing Development Finance, 5.2%; ITC Ltd. (conglomerate), 5.1%; HDFC Bank, 4.7%; State Bank of India, 4.1%; Tata Consultancy Services (information technology), 3.2%; and Bharti Airtel (wireless), 2.4%. The fund’s industry breakdown includes: Banks, 18.9%; Software, 14.2%; Refineries, 10.2%; Engineering, 5.8%; Automobiles, 4.3%; Finance: Housing, 5.2%; Cigarettes, 5.1%; Power, 4.5%; and Steel, 4.5%. The ETF has an expense ratio of 0.89%....